Behind in VAT payments.

V

VATMAN

Guest
Hi,
Does anybody know how the Revenue treat companies who are behind on VAT.?
A friend of mine has a company which seems to be in the beginning of a cash flow problem. They are currently at an overdraft of approx €25000 - €30000 and cant seem to get it down. The problem is they owe VAT for Mar/Apr '04 of approx €4000 and May/Jun of approx €2500. They would like to discuss it with the Revenue but are afraid they will draw the Revenue on them. The average VAT returns for a two month period are €2500 and are afraid that if they contact the Revenue and agree a payment schedule, thay may not be able to live up to the agreement. I know ignoring the problem will not make it go away, so could do with a bit of advice on what they should do.
Basically the Co. can trade ok making a small profit, but if the Revenue decide they want there money immedietly the Co. would be in trouble.

Thanks
VATMAN
 

Brendan Burgess

Founder
Messages
40,246
The first thing they should do is to talk to their accountant and try to solve the cash flow problem. It might be that the company is simply not profitable as it is currently structured. It may be that your friend is taking out too much in salary.

The Revenue appears to be an easy target. If you don't pay a supplier, they will stop supplying you. It takes the Revenue a while to chase smaller amounts. But they do chase and impose interest and penalties. If it's a temporary problem, then the Revenue are very flexible. They will usually write off small amounts of interest if you agree to pay on time in future and stick to your agreement.

Make sure that your friend does not do what a lot of businesses do, use the Revenue to finance a loss making business. It is astonishing how many people claim that they were closed down by the Revenue. They were closed down because their business was unprofitable or because the directors took out more in salaries than they were making in profits.

Brendan
 
V

VATMAN

Guest
Behind in Vat payments

Thank you for your reply Brendan.

My friend is going to talk to his accountant to discuss possible restructure and also cashflow forecasting for the next year.

Just to clarify something. When you say "If it's a temporary problem,then the Revenue are very flexible" Can I take that to mean if a VAT return of, let's say €750 was made for Mar/April the Revenue would adopt the attitude that an effort was being made by the Co. to repay or would they think that the return was not enough and then request more. Also would they expect to see a cashflow statment for the coming year?

Thanks a lot.
VATMAN
 

Brendan Burgess

Founder
Messages
40,246
Re: Behind in Vat payments

The Revenue has a sense of priorities. They go after the big payers as soon as they are a few days late. I understand that they only go after the small amounts when they are seriously in default. If you fall a bit behind, and then catch up again, they don't pursue you.

Brendan
 
O

oilean

Guest
Re: Behind in Vat payments

Making a false statement is probably not the way forward

Make the correct return and pay what you can is usually better

But the choice is always the person signing the form
 
M

money

Guest
vat payments

I know a co. who were behind in their PAYE/PRSI payments by about 5 mths. They wrote a letter to revenue explaining the situation and enclosed a cheque as part payment and advised Revenue that the balance would be paid in the near future when business picked up. I think that so long as Revenue see that you are making an effort they will give some leeway so long as it is not taken advantage of.
 
V

VATMAN

Guest
Behind in Vat Payments

Folks,

Thanks for the replies. I suggested to my friend that it was a good idea to make the correct Vat Return rather than a false one and to contact the Revenue and agree a realistic schedule.
Hopefully this will satisfy the Revenue that the Co. is not trying to avoid paying but is in a cashflow problem which is also being looked at.


Thanks again
VATMAN
 
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